Financial Planning for a Child with Special Needs

Raising a child with a disability or special needs can be emotionally and financially challenging. Understandably, many parents are so consumed by physical caretaking concerns that it can be difficult to find the time or energy to address the financial concerns.

Medical expenses can be devastating to a family’s finances and, in some cases, employer-provided medical insurance is inadequate. Parents or caretakers should familiarize themselves with potential sources of government assistance such as Medicaid.

Parents of special-needs children should meet with an attorney to review estate-planning strategies prudent for their situation. In many cases, a “special needs trust” will be suggested in addition to general wills and revocable living trusts. This special needs trust is critical in protecting the child’s continuing ability to receive governmental benefits such as social security and Medicaid. Word of caution: Sometimes a grandparent’s well-intentioned estate plan can frustrate the overall planning for the child; coordination is key.

Life insurance can play an important role in all new parents’ planning. It is especially important for parents with a special needs child to ensure continuing care for the child. In many cases, a survivorship life insurance policy or “second to die” policy may be used. This type of policy pays one death benefit at the death of the second parent, as this is generally the time when funds are required. It also provides the needed death benefit amount and is less expensive than purchasing two individual policies.

Early financial planning is critical to ensure that the child is cared for emotionally and financially. Unfortunately, planning for children with special needs is highly complex and specialized. There is a complex body of knowledge, and those affected should strongly consider the use of an outside professional (attorney or financial planner) who specializes in this type of planning. For links to various resources and support organizations that may be helpful, go to www.pueblo.gsa.gov/cic_text/family/special-child/specialinfo.html.

– Timothy Wyman, CFP®, JD

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